Distributor Larry Del Papa talks about the business of beer

Larry Del Papa, president of Del Papa Distributing in Galveston,was recently named president of the National Wholesalers Association.

A few weeks ago, I sat down with Larry Del Papa, president of Del Papa Distributing, for a Q&A to run in the Chronicle’s Business section. The company, founded by Del Papa’s grandfather, is celebrating its centennial this year, and Del Papa recently was elected president of the National Beer Wholesalers Association industry group.

Over an hour and a half at his Galveston headquarters, Del Papa was friendly and expansive. The only one-word answer I got from him came when I asked for his favorite beer:

“Budweiser,” he said, without hesitation.

That’s not surprising, given that his company has been carrying Anheuser-Busch products since Prohibition ended in 1933. AB-InBev still accounts for 95 percent of Del Papa’s business, although recent acquisitions have brought a number of craft brands into his warehouse.

Del Papa and I talked about today’s legal and legislative environment, the growing craft and specialty beer market and the state of the three-tier system. Not surprisingly, he was fiercely supportive of the existing, tightly regulated distribution model.

We’ll be running an excerpt of that interview in the Chronicle’s Business section tomorrow (Saturday, Nov. 27). I’ve got some excerpts, right after this picture of the Bud Girls I took during that aforementioned anniversary party. They’re posing with one of A-B’s iconic Clydesdales.

Q: Voters in Washington state this month rejected an initiative backed by Costco to reduce state control. What’s wrong with deregulation?

A: The ills that brought about Prohibition are the same kind of ills that would be recreated if the effective model of alcohol regulation was dismantled. Before Prohibition, and the kind of regulations we now have in this country, you had tied-house laws. A brewer could own a bar. That bar would only sell that brewer’s product. That bar would be indebted to that brewer. The same could be true if we as a distributor were allowed to finance a restaurant, bar, retailer. We could put demands on that retailer to only sell our product. Choice, variety, value would all go away.

Q: In 2009, Texas lawmakers failed to pass a bill to allow small breweries to distribute a limited amount of beer directly to the consumer. Why did distributors oppose the measure?

A: Distributors aren’t necessarily opposed, in concept. The problem is the unintended consequences that would have. You start unraveling the fabric of regulation, the whole thing could unravel. I guess you could say we in Texas, as distributors, we’re very careful about what we support and what we don’t.

Q: Would you support a similar bill in 2011?

A: I’ve got to see the bill first. There is no question that small brewers need some form of relief. I can remember maybe 20 to 25 years ago, we had the Shiner law in Texas. The Shiner brewery was so small that they were relieved of whatever the state tax was that pertained to brewers. That was widely supported by the industry. It’s probably why Shiner is a successful brewery today. It was good law. But in today’s environment, if you make an exception for small brewers you may have large brewers wanting that same exception.

Q: Do you buy the argument that allowing small brewers to sell directly to the public would increase overall demand and benefit distributors and retailers as well?

A: No. I could make the same argument that if I could sell directly to my employees, or if I could sell directly to the consumer, in small quantities, that would be beneficial for the industry. I don’t think it is. We wouldn’t fight it on the merits that we’d lose a dollar or two, we’d argue on the merits of what does that do to the three-tier system. If you connect the dots going forward, what happens? … By and large, I think we all want to see the small brewers be successful.

Q: Let’s talk about the big boys. Were you surprised by the sale of Anheuser-Busch to the Belgium company InBev?

A: Yes. I think the whole industry was. I mean, Anheuser-Busch was the world’s largest brewer. I think maybe two months prior to it actually happening, the rumor mill really started heating up. I was at the airport in New York the day it was announced.

Q: Has it affected your business?

A: Our business is very much the same as it was before. Instead of being a distributor for the largest brewer in the United States, I’m now a distributor for the largest brewer in the world. And that’s a good thing.